How to Increase Your Consulting Fees By Communicating Greater Value


Below is my chapter from the bestselling book Creating Business Growth. Within 1 day of publication Creating Business Growth became an Amazon Bestseller in 8 countries.

The fastest way to grow your business is to increase your prices. (<< Click to ReTweet This) This is hands down the most direct and effective way to grow your revenues.

No longer is the conversation centered around “Buy this because it’s your only choice.” It becomes, “which option would be best for you?” That’s a simple yet powerful difference.

To increase your prices and make more money than ever before, your focus must be on providing value.

And the more value you deliver, the more you can charge.

Once you adopt this approach, your revenue and income can skyrocket. Many of my clients have doubled and even tripled their revenues in months, not years, as a direct result of increasing their prices.

Tip #1-It’s Not About YOU

Okay, we’ve established that to charge more you need to provide greater value. So how do you do that?

First, you need to learn how to demonstrate and communicate the value you are delivering. The most successful business owners do so by following the approach below:

  1. They start by listening. To successfully communicate the value you deliver, you’ll need to discover your buyers’ biggest problems and the desired results they hope to achieve in choosing your product or service.
  1. They ask the right questions. To learn exactly what your buyer cares about most, you should ask as many questions as you can to discover the business impact caused by the problem they are experiencing. Use these questions to guide the conversation, and you will receive valuable information that helps you better communicate the value you are delivering. For example:
  • What is the main area you’d like to improve in your business/life?
  • What is its current impact on your business/life?
  • How long have you been dealing with it?
  • Why have you decided to deal with it now?
  • Tell me more about your current situation (income/weight/health/happiness/morale, etc.) and how you’d like it to change?
  • What are the greatest challenges holding you back from achieving your goals?
  • What is the value of one new project to your business, and how much will dealing with this problem help you achieve stronger business growth?
  1. They determine real value. Once you’ve asked lots of good questions and have plenty of information, you’ll be able to determine the real value of your offering to the buyer. If your buyer wants to attract more clients, and one new client is worth $35,000, that’s critical information to know, and I’ll show you how to use it shortly.
  1. They understand the cost of standing still. When it comes to communicating the value you provide to clients, it’s easy to overlook the cost of staying where they are. In your buyer’s case, not only do they stand to gain from the benefits they’ll receive from buying your product or service; they’re also losing money every day, week, and month that they don’t change their situation and solve the problem they have. If your buyer wants better health, every day they don’t improve their health increases their risk of additional health problems. If they want to attract more clients and increase their revenue, every day they don’t take action constitutes lost revenue for them. If they are currently earning $20k a month and want to increase that to $50k a month, they are losing the difference with each and every month that goes by without action.
  1. They think and speak in terms of value, not cost. As you begin to understand the true value you are providing, make sure it’s in line with your pricing; i.e. if your product or service will save your buyer $12k (the value), you’ll have a hard time selling your solution for $41k.

On the other hand, if your offering produces $250k in value for your buyer, charging $41k is right on the mark. Later, I’ll share how to set your pricing to ensure the right pricing-to-return-on-investment ratio for buyers.

Tip #2-Buyers Like Options (And So Will You)

A sure fire way to increase your revenue is to package up your offerings and provide options for your buyers.

Imagine hiring an architect to help you design your house. You spend time explaining how important natural light is, and how much you’d like to have a covered area for your kids to play in during the winter. The architect takes this information and provides you with a proposal. “Here it is,” she says. “This is what I’d recommend, and the cost will be $80,000.”

If that’s the budget you had in mind, and if the recommendation is exactly what you want, then all is good. However, what if the architect’s proposal doesn’t capture everything you had in mind – either because your budget is different or because you want something different?

Whether you’re offering a service like this architect or selling a product, failing to provide your buyers with options will vastly limit the growth potential of your business.

In this case, the architect would have been much better off providing two or three options. When you offer only one option to your buyer, you’re basically saying, whether you mean to or not, “take it or leave it.”

By providing options for your buyer, you will significantly increase the chance of them saying “Yes” to one of them.

When your buyer is confident that every dollar they invest with you will return a greater value than that dollar, any hesitation to purchase from you fades away.

No longer is the conversation centered around “Buy this because it’s your only choice.” It becomes, “which option would be best for you?” That’s a simple yet powerful difference. And I’m going to show you how to make a lot more money from it.

Profiting From Choice

Most businesses find that offering three options is most effective. Here’s how to lay out your buyer’s options:

Option 1 – This is their lowest price option. It includes the minimum service offering or features your buyer needs to reach a successful outcome. It offers value for the investment.

Option 2 – This option includes the services or features from Option 1, plus additional services, features or products that provide even more value to your buyer. If Option 1 is a book, Option 2 could be a book plus DVD. Or, if you’re offering a workshop in Option 1, Option 2 might include a workshop and coaching for three months. The key is to offer so much additional value that a buyer considering Option 1 is pulled to Option 2.

Option 3 – This is the option with the greatest value and highest price point. When I work through this process with my consulting clients, I always recommend that they start with a blank canvas. I tell them to imagine that their buyer has plenty of resources and that money isn’t an issue – as if their buyer has said, “I have money to invest, so what can you offer me that will help me solve the problem I have or reach the result I’m after in the shortest time possible?” Option 3 usually includes everything from Option 2, plus additional services, features or products.

If Option 1 is priced at $1,000, Option 2 may be $1,600 and Option 3 would be offered at $3,000.

An extremely effective way to communicate value to buyers is to demonstrate that your product or service will produce a significant return on investment for them.

You’ll notice that Option 3 represents a significant jump in price. The reason for this comes down to how buyers make decisions and the percentage of people that will choose each option. The research of two psychologists, Tversky and Kahneman, indicates the following:

Option 1 provides an entry point to working with you. It’s for buyers that have limited resources or don’t fully trust their relationship with you. It allows them to see what it’s like to buy from you, and they often go on to buy more down the road. Typically, 15% of buyers will go with Option 1.

Option 2 will be the most popular. When making a buying decision, most people don’t want to be seen as choosing the least expensive option. They want value, but they can’t justify going with the most expensive option. This lands them right in the middle, and you’ll find that roughly 70-80% of buyers will choose Option 2 as a result.

Your third option isn’t for everyone, and that’s fine. It’s for the buyer that wants the best and is aggressively seeking results. They don’t see the price as a cost, but rather as an investment. And they are willing to pay for it. These buyers will typically represent 5% of the total.

Tversky and Kahneman also identified another factor at play in purchase decision-making, and it’s called Anchoring. What it means is that, when people hear or see a larger number, they will typically perceive a lower number they hear or see right after the first to be significantly less than if they had only seen the lower number.

In the context of pricing, this is significant. If your product sells for $1,000 and that’s your only offer, that’s what your buyer will judge. However, if you also have a $3,000 offer, when the buyer sees your second option for $1,600 and your third for $1,000, both will seem very reasonable in comparison. The $1,000 and $1,600 options haven’t changed – but they’ve been anchored by a higher priced option, which makes them seem significantly lower than if they sat by themselves.

When I take my clients through this process, what I see time and again is that most sellers focus on Option 1. By providing two additional options to buyers, almost immediately your revenue will increase. Just as importantly, your buyers will be happier with the enhanced value you deliver.

The Case For ROI

An extremely effective way to communicate value to buyers is to demonstrate that your product or service will produce a significant return on investment for them.

When your buyer is confident that every dollar they invest with you will return a greater value than that dollar, any hesitation to purchase from you fades away.

So how do you position your offering to provide the greatest return on investment possible?

Similar to asking the right questions to uncover the real problems and challenges driving your buyer to take action now, positioning return on investment starts by asking strategic questions.

The answers to these questions allow you to price your offerings in a way that provides your buyer with value and a positive return on investment, while maximizing your compensation.

In a few moments, I’ll share the formula you can use to set your pricing. Before that, let’s review the type of results-focused questions you’ll need to ask to gather the information required to use the formula:

  • What will these results mean for your bottom line?
  • How will these results impact your company?
  • What will this mean to you personally?
  • What will a positive return on investment look like for you?
  • What will your anticipated savings (or increased profit) be over the next two to five years?
  • How will this benefit your customers and vendors, or provide you with an edge over your competition?
  • What will happen if you don’t move forward (and invest in or get help with ______)?

Another line of questioning which is critically important revolves around intangibles.

These are the benefits and results your buyer will receive from buying from you, but which can’t be quantified as easily as an increase in sales or a decrease in costs. This doesn’t diminish their importance.

When it comes to selling the intangibles include:

  • Safety: how much safer will the buyer be as a result of your product or service?
  • Comfort: how much more comfortable will the buyer be than they are currently?
  • Peace of Mind: how much worry or stress will your product or service remove from the buyer’s life?
  • Ego: how much more confident and/or better off will your buyer feel after investing in your offering?

While it’s difficult to assign a specific numeric value to each of these intangibles, they each impact a buyer’s decision.

Getting answers to these questions should be straightforward, if you’re selling a service as you have the opportunity to meet or talk on the phone with your ideal buyers.

However, even businesses selling products have ample opportunity to ask these valuable questions. You can approach your current or past buyers for feedback, call up a group of prospective buyers, or possibly conduct an online survey. You can even use an online advertising platform like Google Adwords to drive targeted traffic to a questionnaire designed to shed light on the true value connected to the intangible benefits your product or services provide.

Because asking these questions will provide you with insight into the real value your buyers will receive in working with you, failure to ask these questions likely means you’re leaving money on the table during each and every sale you make.

The ROI Formula

Once you’ve received numerous like-minded answers, you’ll be ready to use the ROI Formula:

ROI + Annual + Intangible = Pricing

This formula is part science and part art.

Here’s how to break it down:

ROI: Add up all the quantifiable value your offering provides. If you’re helping people to reduce their operating costs and improve their profit margin by 5%, and that leads to an additional $500,000 in revenue this year, use that number.

Annual: Will your buyer be able to continue receiving the benefits your product or service will provide for more than a year? If yes, be sure to multiply by this factor. Continuing with our previous example, if the $500,000 increase will last for at least two years, the value you’re creating is at least $1M. I typically suggest that my clients assume a factor of two or three years because, even if the buyer will realize value for a longer period of time, many factors can come up that impact their results.

Intangibles: While you can’t assign a dollar value to these, you can and should include them in the formula. You will certainly use them in your sales conversations and proposals because they influence buyers’ decisions.

3-10X ROI

A great ROI ratio to aim for is to produce a three to 10 times return for your buyer.

In this case, if your buyer will receive $1.2M in value, you could charge as little as $120,000 to provide them with a 10X return. You could also go as high as $400,000 to provide a 3X return.

Using this formula, and basing your pricing on value, ensures that your client will be thrilled and that you will receive significant compensation for the value you create.

By using a value-based selling approach, service-oriented businesses can focus on the value and return on investment they provide to their clients rather than the work they do for their clients.

I always aim to provide my clients with a 6X to 10X return, and many see much better results. Whatever scale of return you decide on, ensure that your clients always see significant value and upside in buying from you.

Finally…Embrace The Flow

Product Flow

If you’re selling a product and you don’t have other products to sell to your buyers after the first sale, you’re leaving a great deal of money on the table.

There are many ways you can add compelling products to your business.

For example:

  • Create a product that customers pay for monthly. Examples of this include supplements and membership-based offerings.
  • Have a higher-priced product that your customers can buy after they’ve made their first purchase.
  • Offer services to support and add value to your customers’ initial purchases. This could include consulting and coaching, or ongoing maintenance and training.

Service Flow

If you’re selling services, the sooner you switch to a value-based sales model the faster you’ll increase your revenue and profitability. The biggest mistake service-focused businesses make is charging by the hour.

Hourly rates aren’t based on value, and they severely limit your income potential. To significantly grow your revenues, you’ll be faced with hiring an ever-growing number of staff or increasing your hourly fees to levels that scare off most buyers.

In addition, when you charge by the hour your interests and those of your buyers are not aligned. Your buyers will likely avoid contacting you as much as possible when they know that the more they call, the more they’ll pay. You’ll also find that you’re constantly trying to do more so you can earn more.

By using a value-based selling approach, service-oriented businesses can focus on the value and return on investment they provide to their clients rather than the work they do for their clients.

Imagine that…less work for more money!

As I Was Saying…

To skyrocket your revenues, ask lots of strategic questions and learn how you can help your buyers solve their problems and overcome their challenges. Then give them three options, use pricing based on value, and always be thinking about what other products or services you could provide to add value beyond the initial sale. What else do your buyers need your help with? How can you provide them with even more support?

Consider what you can offer that would provide your clients with the highest level of value and the greatest return on investment. This may take the form of additional consulting, coaching, training, speaking, workshops, or done-for-you services.

As you put these strategies into action, you’ll be able to communicate value more effectively, increase your price-points and earn significantly more than you ever have before.

What’s next?

It’s now time to put these strategies into practice in your consulting business. Would you like to learn about all the strategies you can use to grow your consulting business and find out which ones are the RIGHT ones for your business? If ‘yes’ request your free strategic roadmap call with me here. These are offered on a first-come first-served basis and I only offer a few each month, so request yours now.

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  • Dave Smith

    Really great insights here MIchael. The value-side of things has been a constant element of growth for me. The more I refine my offering and show the value as well as communicate the benefits (little wins) clients receive, the more everyone wins. Thanks for sharing your hints and tips here!

  • Michael, This is a great reference guide when (re)evaluating consulting fees. I can see how estimating ROI can pay off even if the service you offer is something that needs to be experienced in order to be appreciated – such as visual facilitation.

  • Hamish Riddoch

    This is a great article (chapter) Micheal! Too many consultants focus on their specialisms and what they do rather than how they improve their client’s businesses and lives. Applying the approaches you’ve presented here will undoubtedly transform their ability to win work and charge what they’re worth. Thanks! Hamish

  • Phil

    Hi Michael, when talking about a 10X ROI, are you referring to profit or revenue? E.g. If I charge $1000/month for consulting, should I aim to get them $10,000/month in profit or revenue each month? And if I hope to work with them for 1-3 years, obviously there will be diminishing returns, so how to account for that in my pricing? Thanks so much – I’m eating up your stuff these days after stumbling on your interview with our mutual marketing mentor, the good Dr. Glenn Livingston.

    • Great to have you here Phil – Glenn is awesome! If your client will see a total improvement of $1M charging between $100K and $300k is in the range. Ideally aim for 5-6X return or better.

      • Phil

        Okay, I’ll quote 5X revenue and hope to beat it. Thanks Michael!